Birmingham City Council's finances laid bare in new report

Birmingham City Council's cabinet will discuss the report on 14 November

The desperate financial state in which Birmingham city council finds itself has been laid bare in a new report.

According to the report, to be discussed by cabinet on 14 November, it faces a £165m budget deficit in the next financial year, and £177m the year after.

It will need to use its reserves to meet this year's deficit of £87m.

In September the council issued two Section 114 notices, formal admissions it was effectively bankrupt.

The reasons included equal pay claims of up to £760m and an £80m overspend on a troubled IT system.

The report additionally highlights overspending on temporary accommodation, children and families and increased adult social care demand.

It says many of the other contributing factors ought to have been addressed years earlier.

'Only now surfaced'

Government commissioners have now been in place to oversee the crisis-hit council for four weeks.

In a review, submitted for cabinet discussion, commissioners said in that time they had begun to "understand the scale of the challenges", including a range of matters "only now being surfaced".

They noted "very limited progress in developing options to close the budget gap" for the next two financial years and a "radical step-change in approach" was required.

Commissioners require the council to set a clear budget timetable and dedicate project managers to deliver "an extensive transformation programme" over several years.

Finance updates must also be provided at each cabinet meeting in future.

Max Caller is leading a team of seven other commissioners who are expected to be in place at Birmingham City Council for the next five years

"Commissioners believe that with the right leadership the budget can be brought into balance," the report said.

"Although there will inevitably be some difficult decisions, many services could deliver better outcomes for the citizens at lower cost," it added.

The local authority 's cash reserves amounted to just under £600m 18 months ago, but that will fall to £235m by next March.

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It needs to find an extra £678m to meet its liabilities and estimates it must find savings of £200m over the next two financial years.

The council said this meant delivering £165m of savings in the 2024-25 financial year and an additional £35m the year after.

It means capital assets - like buildings and land - will have to be sold off, and other spending projects paused or cancelled.

The commissioners, led by Max Caller, have been appointed for up to five years, but the biggest savings need to be made soon or the council will run out of cash reserves.

Deputy Leader of the local Conservatives group Councillor Ewan Mackey said the report highlighted that the commissioners were still finding new issues in the budget.

Councillor leader John Cotton said there were difficult decisions to be made on what the local authority could afford to do

The most positive news came last month when it was revealed the local authority had struck a deal with unions to end a dispute over a job grading scheme, which it is expected to stem future equal pay claims.

Council leader John Cotton said the local authority was focused on working with commissioners to address its financial challenges.

"This report confirms the figures we have already made public in terms of the budget shortfall we face after a decade of cuts and recent rampant inflation," he said.

"We know it will not be easy and we will have to make very difficult decisions about where money is spent and invested - and what we can no longer afford to do.

"We will continue to be open about the position we are in, however difficult those conversations will be, and what it means for the city."

The authority's cabinet has been asked to endorse the savings targets and commit to delivering the budget.

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